Knowledge Accounting
It is very important for both managers and investors to evaluate a business from a knowledge management point of view because it gives them a more accurate assessment of the worth of the business. In many cases a business does not account for the knowledge that exists in a business. The amount of knowledge within a company can be considered an asset just like if a company owned a piece of equipment. If you look at a place like silicon valley the businesses in that area would not be worth much if assessed with traditional accounting methods concerning assets but the wealth of knowledge within those businesses is immense. If a investor fails to consider the value of knowledge then an opportunity can be missed. A company with big ideas and the capacity to carry out those ideas can be worth a lot of money in the correct market. Some of our largest grossing businesses in America are based on an idea with very little implementation. Companies like Google and Yahoo are dealing in ideas. Recently a high school student sold his idea to Yahoo for an app he created for millions of dollars. While there was application there Yahoo was really buying the rights to an idea. So how do you quantify something like an idea? Well it is not easy but it does take money to acquire and keep information. A company that is packed with people who are thinkers can be worth more than a business with a large building and fancy equipment.
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